Firms can alter their capital structure by:

Question

Quizplus · Accepted Answer

Issuing stock to repay debt is a way that firms can alter their capital structure. This is known as a stock-for-debt swap, where the firm issues new shares of stock to its lenders in exchange for retiring some or all of its outstanding debt. This increases the equity portion of the firm's capital structure, which can improve its financial position and potentially lower its borrowing costs in the future.

Option A is incorrect because not accepting any capital budgeting projects doesn't alter the capital structure.

Option B is incorrect because investing in non-tangible assets doesn't directly affect the capital structure.

Option D is incorrect because becoming a limited liability company (LLC) is a legal form of organization and doesn't directly alter the capital structure.

Firms Can Alter Their Capital Structure By